First published in Places, July 2019.
Like freehold conveyances, leases for terms of more than 9 years must be passed before the Royal Court and registered in the Public Registry. By contrast, leases for shorter terms, known as 'paper' leases, do not require any such formality nor is it mandatory to employ a lawyer to prepare the document. It may therefore be tempting for parties entering into paper leases to prepare the documentation themselves. This is, however, an approach which can involve significant pitfalls.
In the residential context, the Residential Tenancy (Jersey) Law 2011 governs the content of all "residential tenancy agreements". There is a list of 11 matters that have to be specified in the document and certain other provisions that have to be included.
In addition, regulations made under the 2011 Law prescribe a compulsory scheme for the holding of deposits (by mydeposits Jersey) and detailed mandatory arrangements with regards to the preparation of condition reports.
However, it is not just a case of ensuring that legislative requirements are complied with. In the case of both residential leases and commercial leases, it is critical that the lease document accurately and comprehensively reflects what the parties have agreed.
A lease case that came before the Royal Court earlier this year illustrates the dangers of proceeding with a 'homemade' lease. The case concerned a lease of commercial premises in the grounds of the landlords' residence. Unfortunately, the relationship between the landlords and their tenant deteriorated and the parties ended up in Court. The landlords claimed that they would never have let the premises to the tenant if they had known the true nature of the tenant's business to be carried on from the premises. They accordingly asked the Court to declare that the lease was void from the outset on the grounds of misrepresentation. Alternatively, they claimed that the tenant had committed breaches of the express or implied terms of the lease which were so serious and fundamental as to entitle them to cancellation of the lease.
The Court stressed the primary importance, in a contractual dispute, of looking to what the relevant contractual document says. Whilst the Court can sometimes find that parties have agreed certain terms but not actually included them in the written agreement, this was not the case here in the Court's view. Nor was the Court prepared to imply any terms into the lease – it will only do so in very limited cases, essentially if persuaded either that the term is customarily included in contracts of the kind in question, or that it is necessary to imply the term in order to ensure that the contract is workable.
In relation to the claim that the lease was void from the outset, the Court rejected this, finding that there had been no misrepresentation by the tenant as to the nature of its business nor any other mistake which undermined the grant of the lease.
The case serves as a reminder of the importance of ensuring that leases, as well as all other contractual documents, properly document all the elements of what the parties have agreed. If, for example, one of the parties is happy to proceed only on the basis of their particular understanding as to the other's intentions, they should seek to include it in the lease. If the other party resists its inclusion, this will be a warning, before it is too late, that the parties do not share a common understanding.
Mutual trust between landlord and tenant is crucial; by entering into a lease the parties are binding themselves into a relationship requiring performance by both parties of contractual duties on an ongoing basis. Of equal importance, however, is the drafting of the lease document, to ensure that applicable legislation is complied with and that there is clarity on both sides as to their respective rights and duties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.